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    Jan. 15, 2026

Recalibrating Securities Enforcement and Risk: What Fund Managers Should Know About the Shifting Legal Landscape

Growing judicial skepticism and changing ideology from the current SEC leadership have collectively resulted in a recalibration of securities enforcement proceedings and attendant risks. These developments have shifted the risk analysis for private fund managers that are subject to the SEC Divisions of Investment Management and Enforcement. Federal courts have contributed by revisiting foundational questions over the proper forum for civil actions, the role of juries in adjudicating fraud-based claims and constitutional limits on the Commission’s remedies and reach. Those developments follow more than a decade of heightened administrative enforcement activity – particularly after the 2008 financial crisis – and mark a shift toward greater judicial oversight and limitations on the mechanisms securities regulators use to pursue alleged misconduct. These changes have practical consequences for private fund managers subject to SEC regulatory oversight and enforcement. This guest article by Nelson Mullins partner Benjamin Lajoie discusses how these shifts impact the day-to-day risk calculus for decision-making; influence how regulators prioritize and structure an enforcement action; and, importantly, inform how a manager may best respond to an existing or potential enforcement action – whether through strategic response, settlement or litigation strategy in contested cases. See “Former Senior SEC Staff Discuss Effective Compliance Programs and Exam and Enforcement Climate” (Dec. 18, 2025).

Survey Benchmarks Hedge Fund Uptake of Digital Assets

“Once a niche allocation for a few risk-tolerant hedge funds, digital assets are rapidly becoming integral to the investment strategies of most hedge fund managers as well as a growing number of institutional investors,” according to the seventh annual study of when and how hedge funds invest in digital assets conducted by the Alternative Investment Management Association and PwC. An important driver of this trend is greater regulatory clarity in the U.S. “While uncertainty remains, particularly around tax treatment and cross jurisdictional coordination, the trajectory is toward clearer ‘rules of the road’ and broader institutional acceptance,” according to the survey report. This article synthesizes the key findings from the study. See “Study Finds Increasing Hedge Fund Interest in Digital Assets” (Mar. 13, 2025).

The Growing Dangers AI-Based Deceptions Pose to Hedge Fund Managers

The growing sophistication of cybercriminals presents a grave danger to the private funds industry heading into 2026, with the potential for breaches utilizing highly convincing simulacra of real persons generated with the help of artificial intelligence (AI) increasing constantly. Bad actors have grown savvy at impersonating executive personnel and members of deal teams and using AI-based ruses to authorize transactions and payments under false pretenses. Given the sensitivity of the personal and financial data investors trust fund managers to keep safe, they have never been at greater risk. The SEC’s amendments to Regulation S‑P underscore the issue’s urgency. Fortunately, the bad actors are not unstoppable, and there are practical steps fund managers can take to keep customer data and assets safe and avoid regulatory complications. Those themes were discussed in a Manhattan Alternative Investment Network (MAIN) webinar entitled, “Cyber, AI & Compliance Risks – What to Look for in 2026,” and moderated by Robert Akeson, managing director at Riverside Management Group and president of MAIN. This article summarizes key takeaways from the webinar, which featured Michael Brice, founder and president of BW Cyber, and Michael Durrette, chief revenue officer for Compliance Risk Concepts. For coverage of a prior MAIN event, see “Best Practices for Engaging Fund Administrators” (Nov. 20, 2025).

FCA Reports on Off‑Channel Communications

“Robust record keeping and monitoring of communications is essential for firms to detect and investigate misconduct. It also serves as an important safeguard for firms in client disputes and litigation,” said the U.K. Financial Conduct Authority (FCA) in its report (Report) on regulated firms’ policies and practices for monitoring and preserving electronic communications. The FCA studied eleven regulated firms’ approaches to electronic communications that take place “outside of monitored, recorded channels a firm has permitted” (off-channel communications). All firms had improved their approaches to off-channel communications to some degree, according to the Report. On the other hand, most firms continued to observe violations of their internal policies by staff at all levels of seniority. This article parses those and other findings from the study, which hedge fund managers can use to assess their own handling of off-channel communications. Sharing the results of the study “allows firms to learn from others and reflect on their own approach,” noted the FCA. See “Study Reports on Financial Industry Policies and Controls Around Electronic Communications” (Apr. 10, 2025); and “ACA Compliance Testing Survey: Electronic Communications Displace Marketing As Top Concern” (Jan. 30, 2025).

FINRA Sanctions Firm Over Private Placement and Marketing Practices

Greenbird Capital LLC (Greenbird), a FINRA member since 2020, has six registered representatives and one branch office. FINRA has sanctioned Greenbird for alleged violations of its supervisory requirements and telemarketing rules. In particular, Greenbird allegedly failed to have systems and controls for ensuring that its registered representatives did not engage in general solicitation when marketing certain private placements of securities. Additionally, it allegedly lacked appropriate controls over telemarketing calls. This article parses FINRA’s letter of acceptance, waiver and consent with Greenbird. See “SEC, CFTC and FINRA Division Heads Discuss Enforcement Outlook” (Apr. 24, 2025).

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